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THE ELEMENTS OF ACCOUNTING

ASSETS
Assets are items with money value that are owned by a business. Some examples ar
e: cash, accounts receivable (selling goods or services on credit), equipment (o
ffice, store, delivery, etc.), and supplies (office, store, delivery, etc.).
LIABILITIES
Liabilities are debts owed by the business. Paying cash is often not possible or
convenient, so businesses purchase goods and services on credit. The name of th
e account used is Accounts Payable.
Another type of liability is Notes Payable. This is a formal written promise to
pay a specific amount of money at a definite future date.
OWNER S EQUITY
The difference between Assets and Liabilities is Owner s Equity. The can also be c
alled capital, proprietorship, or net worth.
THE ACCOUNTING EQUATION (Study the examples in the book, p. 18)
Assets = Liabilities + Owner s Equity
This equation must always balance!
BUSINESS TRANSACTIONS AND THE ACCOUNTING EQUATION

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